Recent economic reports have been mixed with home sale data showing a drop of 3.5 percent in July which reflects the lowest level in 2011. However, 30 year mortgage rates fall to the lowest on record. With the bond market hitting new record lows in yields and the stock market falling on european economic fears one of the few positive outcomes is lower mortgage rates. Short term Treasuries will be low for at least a few years based on action taken by the Federal Reserve at its most recent meeting to include language in the statement following the last meeting that reflects no change in the federal funds target rates until mid-2013. Therefore, all eyes are on the longer term Treasury rates. With the 10 year approaching 2.0% it may continue at record low levels for some time. This could push the rate on a 30 year mortgage to new lows as well. These changes in rates may be an opportunity for some investors to allocate more funds to the real estate market and less to the volatility of the stock and bond markets. There will be some investors who continue to look for stocks with good dividend payouts and as another alternative may look at corporate bonds. However, real estate can be an attractive alternative to the market volatility. With real estate prices near record lows it may become advantageous to look for income producting properties in both the residential and commercial space. As is always the case it is good to be well diversified in your asset allocations.
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